MoneyGram launches a stablecoin | American Banker

• Key insight: MoneyGram launches its own stablecoin to complement its other work in digital assets. 
• What’s at stake: Cross-border payments such as remittances have long been seen as a potential use case for stablecoins. 
• Expert quote: “The question is why build our own when there are other stablecoins out there? But we see benefits for using our own.” —Anthony Soohoo, chairman and CEO of MoneyGram

Cross-border payments such as remittances are emerging as a viable use for stablecoins, which is why the money-transmitter MoneyGram is issuing its own coin.

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MoneyGram this week launched MGUSD, a U.S. dollar-backed stablecoin, initially in the U.S. for outbound remittances with plans to expand to its global network of nearly 200 countries. MoneyGram’s stablecoin is entering a crowded market with nearly 300 stablecoins, including one from its primary rival Western Union.

While stablecoins aren’t yet widely used for payments, they’re emerging as a way to remove processing steps and costs for payments, particularly transactions involving different currencies in disparate jurisdictions.

“The question is why build our own when there are other stablecoins out there? But we see benefits for using our own.” Anthony Soohoo, chairman and CEO of MoneyGram, told American Banker, adding MoneyGram also supports other stablecoins. 

MoneyGram’s coin

MGUSD is integrated into the MoneyGram app through a self-custodial wallet. MoneyGram’s partners include Bridge, the Stripe-owned stablecoin technology firm that will issue the stablecoin under Bridge’s trust charter. MoneyGram is deploying the stablecoin on the Stellar blockchain and is holding MGUSD in Fireblocks wallets. MGUSD tokens are minted and burned using cryptocurrency technology company M0’s smart contract infrastructure and deployed on the Stellar blockchain at launch. MoneyGram did not disclose the revenue agreement among the parties. 

Soohoo contends stablecoins are mostly focused on the actual digital asset and finding uses for that asset, while MoneyGram is focused on how its large distribution platform will bring MGUSD to a wide audience. 

“We’ll have a ready market from the start,” Soohoo said. 

MGUSD will be available as an option on MoneyGram’s app alongside other stablecoins, which MoneyGram will still support. MoneyGram’s existing stablecoin-related services include a partnership with Stellar to enable MoneyGram customers to receive funds into a U.S. dollar-denominated balance and cash those stablecoins at a MoneyGram location. MoneyGram also is working with payments fintech Nala to enable stablecoin settlement for payouts in Africa and Asia.

MoneyGram International

While there are hundreds of stablecoins, stablecoins tied to cryptocurrency companies such as Circle’s USDC and Tether dominate the market. Bank stablecoins are still mostly in development and payment company-focused stablecoins such as PayPal’s PYUSD have not drawn a large market of consumer users. By offering its own stablecoin, MoneyGram can “own” the application layer, Soohoo said, adding that it enables MoneyGram to use the stablecoin as a base to build and sell other payment products.

MGUSD also enables more control over payment processing for transactions that use digital assets, which reduces the need for third parties to perform some functions, or to share in the revenue. 

“This enables us to offer a lower cost product to our consumers,” Soohoo said. MoneyGram did not provide details on discounts or lower fees for stablecoin remittance products. 

International coins

MoneyGram faces several competitors in using stablecoins to streamline cross-border payments. 

“This is one of the true real-world use cases for stablecoins,” Tony DeSanctis, a senior director at Cornerstone Advisors, told American Banker. “The cost of transactions using traditional rails creates an opportunity to leverage blockchain and stablecoin as a lower cost alternative.”

MoneyGram rival Western Union categorized its own stablecoin as a way to contain the cost of supporting an international payments network by reducing work with partners while earning interest revenue from the underlying treasuries backing the stablecoin. 

“MoneyGram is trying to protect its core business and hoping it can leverage stablecoin to lower costs and compete better with direct stablecoin solutions,” DeSanctis said. 

Among other firms, Coinbase recently partnered with Nium to boost distribution of the USDC stablecoin. Visa is building a network of blockchains to expand its stablecoin settlement network. 

“It’s clear that every company involved in cross-border transfers will need a way to support stablecoins, whether they issue their own coin or work with existing stablecoin providers,” James Wester, director of cryptocurrency at Javelin Strategy & Research, told American Banker. 

The important part of MGUSD is not just that MoneyGram is issuing a stablecoin, but that it enables MoneyGram to connect it to real-world cash-in, cash-out and local payouts it already has built out, Wester said. 

MGUSD also gives MoneyGram an opportunity to support risk management and address complications involved in converting stablecoins to traditional currencies on either side of a cross-border payment. 

“MoneyGram also understands the compliance and FX pieces,” Wester said. “Stablecoins are interesting for cross-border payments, but the last mile is the hard part.”